Issue link: https://maltatoday.uberflip.com/i/741600
14 SOME things are predictable in life; one of them is that, whatever one of Malta's two major par- ties does in government, will be instantly criticised by the other party in Opposition. This is in a sense to be expected. After all, the job of an Opposition party is to hold the government to account over its policies and ac- tions. It becomes slightly problem- atic, however, when you consider how little the two parties actually differ when it comes to social and economic policy. Their individual approaches to certain issues may differ in the detail... but scratch beneath the surface, and you will find (Budget 2017 is no exception) that the broader policy objectives remain largely indistinguishable. Like all Nationalist administra- tions before it, Muscat's govern- ment chose to ignore various calls – among others, by Caritas – for an increase to the minimum wage. Instead, it added to the Cost of Liv- ing Adjustment. Likewise, calls for rent control fell on deaf ears, with the government responding to market alarm by doubling existing subsidies for vulnerable tenants: in other words, passing the bill onto the taxpayer. This seems to indicate that, like the Nationalists before it, the La- bour administration prefers to avoid 'politically sensitive' deci- sions, even if it means increas- ing its own expenditure. Instead, both parties consistently choose to absorb the financial impact of Malta's expensive social welfare system, through a generous system of subsidies and hand-outs. This creates a curious dichoto- my. On the one hand, both Labour and PN claim to be the 'party of the workers', and position them- selves as champions of the down- trodden and underprivileged. At the same time, both favour tax- breaks for the super-rich... a right- wing economic policy platform, if there ever was one. So isn't the PN's response to the Budget a little rich, coming from a party that handled the same is- sues – poverty, rental prices, etc – in exactly the same way when the shoe was on the other foot? Paula Mifsud Bonnici, president of the PN's executive council, doesn't seem to think so. Asked to identify the difference between the parties' approaches, she points towards the successful way the Gonzi administration had diversi- fied the economy in its (roughly) 10 years in power. "The Labour government did score a lot of good points with re- gard to the economy," she begins. "Unfortunately, these good points were overshadowed by the many scandals there have been in the last three years. One of our main con- cerns, however, is that while the government managed to grow the economy, this economic growth is still based on long-established sectors: tourism, which is still the mainstay; financial services, I- gaming..." Are those sectors really 'long- established', though? Leaving aside tourism – which began in the 1960s – I-gaming is actually a very recent addition... "But it was introduced under the Nationalist government... our concern is that Labour has not managed to attract any other new sectors of economic business. The other side of the picture is that, even though we have economic growth, we feel this growth is not trickling down to all strata of soci- ety. Unfortunately, the NSO statis- tics confirm this. "There was also the Caritas re- port which confirmed that, while some people are getting richer, there is also a big category that is getting poorer. That's why we've been trying to engage with the gov- ernment to refocus on what should be its policy with regard to people living in poverty. I think this gov- ernment managed to create a dis- parity between those people who are profiting from the economy, and those who are struggling to make ends meet..." But again: how 'new' is this phe- nomenon? The rich have been get- ting richer, and the poor poorer, for decades... "It has grown recently, however. The elderly, for example: between 2012 and 2015, there has been an increase of over 5,000 people who are over 65, and who are now at risk of poverty. There are other categories, like people who are not in full-time employment. People who cannot work for some reason or other... all these sectors are on the increase." This perception is indeed borne out by various indicators, includ- ing the aforementioned reports. But this only raises another ques- tion. Given that, by her own admis- sion, Labour has merely continued Nationalist economic policies without changing them... doesn't this imply that the PN would do exactly the same? Mifsud Bonnici replies by point- ing to how the country's circum- stances have changed since the PN enacted those policies... in some cases, more than a decade ago. "If we stick to the Caritas report, I think it is very indicative of what is really happening today. In my opinion, Caritas did a very good job. It is a very detailed report, even if, perhaps, a little conserva- tive. Nonetheless, it managed to identify what a family needs, in terms of income, to be able to lead a decent life. Having said this, it doesn't give a complete picture. For instance, when calculating the amount of money needed by an elderly couple, it didn't take any additional medical expenses into consideration. That would surely increase the number of people liv- ing in poverty. "Separately, the report doesn't go into the question of how many people are in that category. It does, however, give a very precise indication of what sort of income one needs to live decently. In the case of a family with two children, with one of the bread-winners on minimum wage, it works out at €11,464. Caritas came to the con- clusion that people in that category are €800 short, with what they take home today..." Seeing as we are discussing the Caritas report, it is pertinent to also mention some of the organi- sation's recommendations. Caritas has long been insisting that the minimum wage has to go up. The government resisted this in its budget. What is the PN's position? Does the Nationalist Party agree with Caritas on the issue of raising the minimum wage? "We have discussed the issue. There are pros and cons to the suggestion. One question to ask is whether raising the minimum wage would increase the number of people in full-time employment. The living wage, too, could per- haps be part of a solution..." That was also a subject raised by Joseph Muscat before the election, but it seems to have slipped off the nation's radar since then. Is this al- so being discussed within the PN? "Yes. No decision has been taken, but we are discussing the pros and cons, as we do with all such issues. Obviously, we would need a good household budgetary survey. The last one was carried out five years ago. But whether or not the living wage is introduced, the Caritas re- port already goes one step further by establishing how much money is actually needed by struggling families. This gives us something to aim for: you would then have to top up people's income with that amount..." But this is what I meant when I said the parties' approach is identi- cal. There is already a mechanism in place for that purpose – COLA, which was introduced by the PN as an antidote to talk of wage increas- es. Is the PN still of the opinion (as it always was in the past) that there is no need for a minimum age in- crease because of this mechanism? "COLA would have to be rede- fined, definitely. There is a for- mula whereby COLA is calculated, and personally I don't agree with it at all. Even within that formula, however... COLA was set at €1.75 in this budget. Not because that was the amount specified by the formula, but because the govern- ment topped it up. According to the formula as it stands today, this year's increase should have been €1.16. The government increased it to €1.75, anticipating next year's COLA. Is that correct? Definitely, €1.16 does not reflect the amount that is needed according to the Caritas report. But is the govern- ment right to increase it by eating into next year's budgetary alloca- tion?" Well, Mifsud Bonnici herself seems to be suggesting she agrees with increasing it to €1.75. If the original amount was by her own argument insufficient, wasn't the government right to increase it? "It depends how. I agree that €1.75 is better than €1.16, natural- ly. In fact I would argue that even €1.75 is not enough. If I am correct, however, the problem is that the government has increased COLA by taking from next year's budget- ary allocation. What will happen next year, if that's the case?" Meanwhile still sticking to the Caritas report: Budget 2017 stopped short of introducing any mechanism to control sky- rocketing rental prices. Instead, it doubled existing subsidies for low-income earners. This has been criticised, on the grounds that it might discourage landlords from registering their rental properties... while indirectly encouraging them to raise prices. In both scenarios, the hardest-hit would be the most vulnerable. Does the PN agree with introduc- ing rent control? "That's another major concern for our party. In fact, it was one of the proposals in our pre-budget document, that the increase in rent subsidy should reflect the ac- tual increase in rental prices. We are very happy that this proposal was, in fact, taken on board. But the PN is against freezing rental prices. We don't want to control the market in that way; but we do recognise that the more you increase rent subsidies, the more landlords might increase the rent. It is a concern. I still think we can find a way to provide incentives to the landlords – while subsiding rents for low-income earners – so that they won't think twice about leasing properties to this bracket. There are tax incentives that could be considered. You don't have to directly control prices. For exam- ple, the previous government had introduced a scheme – it may not have been 100% foolproof, grant- ed, but these things can always be improved – called 'Skema Kiri', whereby the government sub- leased private properties at subsi- dised rates..." Yet all along, the cost of renting Interview By Raphael Vassallo maltatoday, SUNDAY, 23 OCTOBER 2016 I think this government managed to create a disparity between those people who are profiting from the economy, and those who are struggling to make ends meet Even though we have economic growth, we feel this growth is not trickling down to all strata of society DISPARITY DISTRIBUTION OF WEALTH A budget without vision.